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Misuse of the Non-Profit Sector for Money Laundering and Terrorism Financing

NCJ Number
Samantha Bricknell
Date Published
September 2011
6 pages
After examining money laundering and terrorism financing (ML/TF) risks to the Australian nonprofit sector, this paper documents cases in which this has occurred and assesses Australia's response for countering ML/TF through nonprofit organizations (NPOs).
The misuse of NPO-generated funds may occur in a number of ways. First, funds may be collected in the name of a legitimate NPO but be disbursed for terrorists rather than altruistic causes. Second, an NPO may be used to launder money or provide legitimate means for the transmission of funds between multiple locations. Third, funds may be misused by the recipients themselves. In any of these scenarios, the NPO may or may not be complicit in or aware of the abuse being committed. There could also be a misuse of NPO vehicles and property to transport or house terrorist operatives, money, and weapons. From the publicly available evidence, there is little to suggest that there is substantial misuse of NPOs for ML/TF. Case studies have shown that opportunities exist and are exploited for ML/TF, but the number of published cases studied is still relatively small. This could suggest that the prevalence of ML/TF misuse is itself low. Conversely, it could indicate there are low detection rates for this kind of illegal activity. The majority of the cases detected involved either the establishment of a sham NPO, in every case a charity, or the exploitation of a legitimate entity to raise, transfer, distribute, or launder funds. The current Australian regulatory regime for the nonprofit sector does not have an overt emphasis on ML/TF issues, although the encapsulation of designated services used by the NPOs under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 does afford good protection. 32 references